With market volatilities here to stay, investors can consider adding dividend yield funds to their portfolios. Known to contain declines better than pure diversified funds during market corrections, these funds also boast an impressive scorecard in recent years.

Tata Dividend Yield Fund, given its track record of consistent performance and well-diversified portfolio, makes a good investment candidate now.

While peer funds as ING Dividend Yield and UTI Dividend Yield also appear promising, Tata Dividend's midcap-focussed portfolio gives it an added edge.

It has also consistently beaten its benchmark BSE Sensex as well as the broader index BSE 500 over one-, three- and five-year time-frames. Investors can accumulate units in this fund through a systematic investment plan (SIP).

Suitability : While dividend yield funds typically do well during periods of volatility and market correction, their performance during secular bull runs has been more in the middle-of-the-road order.

The same is reflected in the performance scorecard of Tata Dividend Yield fund too. The focus on mid and small-cap stocks, however, pegs up its risk somewhat. The fund, therefore, makes a suitable choice for investors with a moderate risk appetite, looking predominantly for steady returns.

If you are building long-term wealth, then exposure to dividend yield funds should be limited.

Performance : Tata Dividend has delivered 25 per cent and 12 per cent over three- and five-year periods, respectively. During these periods, the fund also outperformed the Sensex and BSE 500 by comfortable margins. The fund also matched or bettered other dividend yield funds over these time frames.

While it was the top performer in its category in the three-year period, its performance lagged Birla Sun Life Dividend Yield by a negligible margin.

However, what really merits note here is its improved performance in the year gone by. Having contained its NAV loss to 4 per cent over the year, Tata Dividend is one of the top three performers in its category.

This performance holds significance since the year was marked by high volatility in the markets.

With markets likely to remain indecisive, Tata Dividend's ability to manoeuvre volatile markets provides confidence.

In market declines such as the one seen in May-June 2006 and the prolonged fall of 2008-09 or from November 2010 highs to now, the fund has checked downsides better than its benchmark.

Its performance during rallies has also been decent enough.

While it wasn't the top performer in its category, it managed to comfortably better its benchmark in the bull run of 2007 and rally from March-2009 lows.

Its year-to date performance too has been reasonably impressive. The fund has returned about 11 per cent as against 4.5 per cent and 8.2 per cent clocked by Sensex and BSE 500, respectively.

Portfolio : The fund now sports a fairly diversified portfolio. The top three sectors make up about 47 per cent of its total holdings, while the top 10 stocks account for 41 per cent.

Its current portfolio is made up of 57 per cent large-cap stocks (market capitalisation of more than Rs 7,500 crore) the rest being mid and small-caps, such as CRISIL, Ashok Leyland, Tata Motors-DVR, Navneet Publications and TNPL.

Its top stock choices are a mix of stocks across market capitalisation categories.

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